Comptroller Stringer on FY 2020 Preliminary Budget: City Needs a Robust Savings Plan to Protect Vital Services for New York Families

Agency Watch List reveals lack of accountability and results despite record spending at the Department of Correction, Department of Buildings, and multi-agency spending on homeless services

Comptroller’s analysis of the City’s proposed FY 2020 budget shows budget gaps closed using numerous one-time actions instead of recurring savings

Stringer calls for increasing the City’s budget cushion to 15 percent of total spending by FY 2023 to protect the social safety net  

  New York City Comptroller Scott M. Stringer delivered his annual analysis of New York City’s Preliminary Fiscal Year 2020 budget which revealed a lack of financial preparedness for potential future economic uncertainty, and an absence of tangible results despite increased record spending at three City agencies.  Comptroller Stringer’s analysis found the proposed FY 2020 budget relies on numerous one-time actions to balance the budget and called for a goal of increasing the City’s budget cushion to 15% of total spending to sufficiently prepare the City for unforeseen events and protect programs that lift up New Yorkers.  Additionally, the Comptroller’s Agency Watch List –  which spotlights city departments without demonstrable results for their spending –  revealed record multi-agency spending on homeless services, which is projected to reach nearly $3 billion even as the shelter population continues to rise.  Meanwhile, the Department of Correction is spending over $300,000 per detainee as incidents of violence increase.  New for this year, Comptroller Stringer added the Department of Buildings to his Agency Watch List due to a 252% increase in construction accidents since FY 2014, despite increasing spending by 62% over the same period.

“The City’s budget is a statement about our values, it’s our opportunity each year to consider how we are serving working families and promoting policies that will empower all New Yorkers.  While there are some critical initiatives included in the FY 2020 budget, we must be doing more to reach a balanced, sustainable budget and ensure that city agencies are accountable for the public money they spend,” said Comptroller Stringer.  “Our budget needs to be balanced for the long term, not just for the next year, so that we can ensure that vital initiatives and services for families and seniors go uninterrupted regardless of the broader economy.  To reach that goal we need to build up our budget cushion and conduct a more rigorous review of agency spending to root out inefficiencies and waste.”

The Comptroller’s wide-ranging presentation covered several aspects of the City Preliminary Budget and the state of the City’s economy, including:

Overview of the FY 2020 Preliminary Budget

• Spending growth is 2.1%, adjusted for the anticipated use of the FY 2019 surplus to prepay certain FY 2020 expenses;
• Spending is projected to grow at an average annual rate of 2.3% over the entire Plan period, fiscal years 2019 to 2023;
• In contrast, revenues are projected to grow at an average rate of 1.8% each year until FY 2023, resulting in budget gaps of $3.5 billion in FY 2021, $2.9 billion in FY 2022, and $3.3 billion in FY 2023; and
• So far this year, the February Plan shows a projected $3.2 billion budget surplus in FY 2019, $1.4 billion less than the $4.6 billion budget surplus of FY 2018.

The Economic Outlook is Clouded with Risk

• While the City’s economy is still growing, the Comptroller’s office forecasts that growth will slow in coming years;
• The short-run stimulus effects of federal tax cuts and spending will wear off just as the national economy reaches the late stages of the nearly decade-long expansion, and global growth slows sharply;
• As a result, economic growth in the City is expected to decelerate, with job growth falling from nearly 90,000 new jobs per year since the end of the Great Recession in 2010, to under 35,000 on average from 2020 through 2023; and
• The State Budget faces growing challenges, following a $2.3 billion personal income tax revenue shortfall – which puts State aid to the City at increasing risk.

City Must Manage the Budget More Aggressively to Address the Growing Risks

The City’s projected budget cushion – the budget resources available at the beginning of each fiscal year to help the City weather unexpected events without cutting vital services for New York families – is currently in

• The optimal range for the City’s reserve cushion is between 12% and 18% of spending;sufficient, at just 9.5% of adjusted FY 2020 spending.
• At the start of the last recession in FY 2009, the City’s budget cushion was equivalent to nearly 18% of spending;
• Progress in increasing the cushion has stalled at around 11% since FY 2017;
• As of the February Plan, the City’s projected accumulated surplus is over $1.4 billion less than at the start of the year; and
• To reach the lower bound of the optimal range, the City needs to add more than $2 billion to the budget cushion before the FY 2020 budget is adopted.
• Comptroller Stringer is calling on the City to increase savings and other actions to reach a target for the budget cushion of 15% of total spending by FY 2023 in order to prepare for economic uncertainty.

Use of One-Shots

• The City has relied too heavily on “one-shots” – non-recurring resources which could be held for use when they are more urgently needed – in building the FY 2019 surplus;
• This includes $371 million in funds from NYC Health and Hospitals deferred from prior years and bank settlements; and
• Property sales totaling over $118 million.

Need for Vigorous Agency Savings Plan

The Mayor will re-institute a Program to End the Gap, or PEG, of $750 million for FY 2019 and FY 2020, with targets to be set individually by agency.

• The Mayor’s proposed PEG target of $750 million represents just 0.9% of City funds agency budgets for FY 2019 and FY 2020 – assuming all savings are realized through agency savings and not through actions such as debt service savings or other non-agency actions;
• In the past, City agencies contributed more relative to the City-funds budget, with average agency savings equal to about 2.7% of City-funds agency expenditures from FY 2008 through FY 2013;
• The average agency savings in the Citywide Savings Program since FY 2015 amounts to 1.0%; and
• Comptroller Stringer once again recommends that City agencies do a serious scrub of their budgets and operations to identify more savings and efficiencies to help address potential risks.

Agency Watch List

This year the Comptroller continues the Agency Watch List of City agencies that are of most concern when it comes to budgeting, and adds to them the Department of Buildings.

DHS: Citywide Spending for Homeless Services Continues to Rise While Homeless Population Grows

• Citywide spending on homelessness across all agencies has more than doubled from $1.3 billion in FY 2014 to a projected $2.9 billion in FY 2020;
• Spending on shelters alone has doubled since FY 2014 – from $1.1 billion to $2.2 billion in FY 2020; and
• Despite major investments in prevention and housing, the number of individuals residing in shelters has steadily increased from 51,770 in 2014 to 60,366 as of February 2019.

DOC: Jail Population Continues to Fall, but Spending – and Violence – Still Rising

• In the last decade, the average daily jail population has declined by fully one third, from 13,850 in 2008 to under 9,000 in 2018;
• But over the same period, the average annual cost of housing someone on Rikers has more than doubled, from about $117,000 in 2008 to over $300,000 in 2018; and
• The number of violent incidents against both detainees and correctional officers has more than tripled over the same period, from 441 per 1,000 average daily population in 2008 to 1,354 per 1,000 average daily population in 2018.

DOB:  Spending and Headcount Have Grown, but Construction Safety Has Gotten Worse

• Since FY 2014, the Department of Buildings budget has grown 62%, and headcount has increased by over 50%, to 1,565 employees;
• Over the same period, however, the number of construction accidents – including fatalities – has skyrocketed, with accidents climbing 252%, and fatalities by 167%; and
• Similarly, while the number of plan examiners has increased sixfold, the number of new construction permits issued has only grown by 13%.